The problem of “peak oil”

Here’s a column I wrote after attending a Dec. 2005 conference for editorial writers hosted by the Knight Center for Specialized Journalism at the University of Maryland.

Peak oil piques energy concern

By: DENIS DEVINE – Staff Writer | Saturday, December 17, 2005 9:19 PM PST

The high natural gas prices on most Americans’ minds this winter may be the least of our worries when it comes to energy. What if oil itself, the lubricant and fuel that keeps our entire industrialized world running, is running out?

I spent a few days recently among some of the sharper editorial writers in the country listening to people with high-voltage expertise in energy. This gathering hosted by the Knight Center for Specialized Journalism at the University of Maryland convinced me that not only do I need to know much more about our nation’s energy outlook —- you do, too. Because when it comes to paying for energy, the choices awaiting us promise only to get tougher.

Coastal drilling coming
How much, for instance, are we willing to pay to keep our ocean horizons free from oil derricks or wind farms? Those old platforms off Santa Barbara helped launch (and somehow survived) the environmental movement, but a perennial push to make more of them gushed onto Capitol Hill this year. Industry ambitions to drill in the Arctic National Wildlife Refuge may get the most ink and airtime, but offshore drilling is much closer to home for Californians. The Republicans running Congress retreated from their recent effort to open the outer continental shelf to new oil exploration, but it was only a temporary victory for those who value unspoiled ocean vistas.

“We need to drill in the outer continental shelf because that’s where the oil is,” John Felmy, chief economist for the American Petroleum Institute, told the assembled editorialists.

Echoing Felmy’s vision of inevitable offshore drilling was Energy Secretary Samuel Bodman, who offered the seminar’s rosiest outlook for the United States’ energy future. Matthew Simmons, an investment banker whose well-researched pessimism about the abundance of Mideast oil reserves has rocked the energy industry, sung a similar tune.

Hearing otherwise conflicting voices agree that new rigs off California’s coast is a matter of when, not if, helped drive home the urgency of the coming oil scarcity.

Scaling the peak
We’ve long known that oil is a finite resource. But with the modern world so deeply indebted to the amazing energy captured in “black gold,” our society has failed to prepare for a post-oil economy. Sure, you hear occasional sputters about “renewable energy alternatives” and that “hydrogen economy” hype of some years back, but no alternative fuel source is yet prepared —- or even close to ready —- to pick up the slack should the world’s oil wells begin to run dry, or at least dry up faster than new reserves can be found. But that’s exactly what a growing cadre of oil geologists say is beginning to happen.

They use a geological term —- “peak oil” —- to describe the historical moment when the world’s oil production stops growing and begins to decline. The United States reached its peak oil production in 1970. Since then, we’ve been relying on an increasing tide of imported oil to meet demand that has increased an average of about 1.7 percent per year for the last two decades.

But at some point, those foreign wells —- mostly in the Middle East —- will start to run dry as well. Oil-producing countries like Saudi Arabia, which has 22 percent of the world’s known reserves, say that peak won’t come for decades. Optimistic oil-industry analysts say technology advances could push that date even further into the future. Today’s high prices should spur conservation among consumers, this viewpoint holds, plus more exploration and production from oil companies and OPEC nations.

Saudi estimates questioned
Yet many experts are issuing far more pessimistic forecasts for future oil production. Their books —- with provocative titles like “Twilight in the Desert,” “Beyond Oil,” “The Coming Oil Crisis,” and “Out of Gas” —- are proliferating as their views gain wider acceptance within academic, industry and government circles. These peak-oil predicters, including some of the world’s most respected petroleum geologists, say that global oil production is at or will soon reach the point at which reservoirs can’t produce increasing quantities of oil, and the impending scramble for the world’s most important resource will severely test the global economy and world peace. To these Cassandras, it may be too late to invest in renewable energy replacements or some miracle new energy source to stave off global disaster. Where optimists see a commodity controlled by markets, pessimists point to geological limits on the amount of oil available to us.

Simmons, who advised President Bush’s 2000 presidential campaign on energy policy, has catalyzed the debate over peak oil with his rigorous and highly skeptical analysis of Saudi Arabia’s estimated 260 billion barrels of proven reserves. Just how much oil actually lies beneath Saudi soil is among the world’s most closely held state secrets, but Simmons isn’t content to take the Saudi royal family’s word.

“It’s the world’s most incredible illusion, that the Middle East has a limitless supply of oil,” Simmons said.

Instead, Simmons’ research into long-overlooked engineering reports revealed that Saudi oil fields probably don’t contain the vast reserves of recoverable oil that the kingdom would have the world believe —- a charge the Saudis scoff at. But no giant oil fields have been discovered lately that compare to the reservoirs the Saudis have been tapping for decades; the Houston Chronicle recently reported that 2005 will finish as the worst year for oil exploration success in the history of the industry.

Another seminar speaker, Ronald R. Cooke of the Association for the Study of Peak Oil and Gas, put it this way: “Drilling more does not help; world consumption now exceeds new discoveries by more than 2 to 1.”

Prices won’t retreat
What could this mean for the United States? The seminar’s dizzying array of experts offered a range of predictions, many of them dire. Simmons, for instance, thinks that we’ll be looking back on $60 and $70 per barrel oil prices the way we now reflect longingly on the $3 per barrel common in the 1960s.

Nor do natural gas prices figure to return to the low levels of the 1990s. As more electricity-generating plants that burn natural gas have come on line, they’ve eliminated the summer off-season that traditionally allowed prices to retreat after the highs of winter. While China and India have emerged as real competitors for global oil supplies, so has much of the world begun bidding against us for squeezed natural gas supplies —- compounding the U.S.’ difficulty in making up the hurricane-driven shortfall earlier this year.

Investment in new oil exploration and refineries has lagged too long. Historically volatile energy prices have scared off venture capitalists, and U.S. oil companies sank their profits into buying up their rivals in mergers, not digging new wells or building new refineries. Simmons figures we are somewhere between two to four decades behind in investing for a stable energy future. The cost to catch up, he said, could run to the trillions.

“Someone will have to belly up to the bar to spend somewhere between $16 trillion and much more, two to three times that,” he said. “We need to urgently figure out how to reinvest and remodel our energy infrastructure.”

Conservation conversion
We will also have to get serious about conservation. I wasn’t sure whether to laugh or cry when Secretary Bodman’s staffers handed out the Energy Department’s bold new initiative: a pamphlet of energy-saving tips of the kind that SDG&E has been mailing its customers for years. But this represented a measure of progress for an administration whose No. 2, Dick Cheney, famously said conservation “may be a sign of personal virtue, but it is not a sufficient basis for a sound, comprehensive energy policy.” That was in spring 2001, as we Californians were setting records for energy conservation under the gun of rolling blackouts.

Efficiency advocate Kateri Callahan, president of the Alliance to Save Energy, touted a host of promising signals she says indicate that our nation is coming around to conservation. Producers of insulation, which energy savers recommend be wrapped around hot water heaters and stuffed into attics, can’t keep up with demand and are rationing their products to vendors, she said.

Callahan may have offered the most favorable assessment of the energy bill President Bush signed in August. The bill came in for a shellacking from almost all of the seminar’s speakers, but Callahan noted the high priority it gave to energy efficiency. Callahan predicted that the bill’s standards for appliance efficiency could save 10 percent of the expected U.S. energy demand by 2020 if Congress doled out the necessary dough.

And there’s the rub. Even the best elements of the much-maligned energy bill won’t do much if Congress doesn’t pony up the cash. It’s not just conservation programs that have gotten short shrift: One of the bill’s most popular changes —- approval to double the size of the Low Income Home Energy Assistance Program, a lifeline for poor folks unable to pay skyrocketing natural gas and home-heating oil bills —- means little until Congress comes up with the cash.

Alternatives
Conservation alone won’t be able to meet U.S. energy demand as oil discoveries fall increasingly behind consumption. Rushing to fill that yawning gap are a variety of alternatives that appeal to very different constituencies and promise to fill different needs: “unconventional” oil sources, like oil or tar sands and oil shale; nuclear power, like that generated at San Onofre; and renewable energy sources like wind, solar, geothermal and biomass.

Oil fuels so much of modern life —- everything from agricultural fertilizers to plastics to home heating —- that it’s as easy to take for granted as air. But it will be hardest to replace in transportation, so the global oil industry is rapidly turning to unconventional sources for more of the same petroleum.

The upside is that our ally Canada is the “Saudi Arabia of tar sands,” while the United States boasts the world’s richest known reserves of oil shale within its borders. The downside is that it takes a lot of energy to extract the energy locked within these deposits. What’s more, the extraction is terrible for the environment —- oil production from tar sands in Canada has created a toxic soup that is stored in big ponds held in check by the world’s largest earthen dam.

Expansion at nuclear plants
For the rest of the energy picture, we have far more alternatives at our disposal.

The Bush administration is bullish on nuclear power helping meet rising demand for electricity. The August energy bill backed nukes in a big way, authorizing loan guarantees for up to six new nuclear power plants. That tracks with Energy Department estimates released Monday that call for at least six new reactors to be built after 2014. Analysts at the seminar said they expected a “new nuclear initiative” to be announced by the Bush administration in January. Bodman was already selling nuclear power as the best way for us to keep up with electricity demand that is expected to rise 50 percent over the next 20 years.

“We need nuclear power; in my opinion, it’s the only way to do it,” said the energy secretary.

But while the federal government has fallen back in love with nuclear power, local communities haven’t. So if your community is lucky/unlucky enough to already have a nuclear power plant nearby, expect that plant to expand its capacity.

Just Thursday, the California Public Utilities Commission gave the green-light to Southern California Edison to replace aging steam generators at the San Onofre facility. Such repairs and upgrades at existing nuclear plants are the path of least NIMBY resistance.

Joseph Kelliher, the chairman of the Federal Energy Regulatory Commission, said as much when he cited statistics that he said showed community resistance to a nuclear plant drops after the plant has been operating for a decade.

“Adding units at existing sites is a solution to overcoming public opposition,” Kelliher said.

How to store the accumulating toxic waste, with the permanent storage facility at Yucca Mountain in Nevada still a distant and controversial goal, is still a path with much resistance.

Renewing hope
Most everyone looking at our growing need for electricity is energized by renewable power sources —- wind, solar and the like. But even their most enthusiastic supporters don’t pretend that their preferred alternative is close to ready to pick up the slack after “peak oil.” A lot of research and development still must be done to make energy from renewable sources faintly approximate efficiency of the power-packed petroleum modern society relies on.

Secretary Bodman’s “favorite” renewable energy source —- solar power —- is also popular in sunny Southern California. Solar got a boost on Tuesday when California’s Public Utilities Commission proposed more than $3 billion in consumer rebates to slap photovoltaic panels on more than 1 million homes, businesses and public buildings over the next 11 years. If it sounds familiar, the PUC’s California Solar Initiative is Gov. Arnold Schwarzenegger’s Million Solar Roofs Initiative reborn. Backers hope this version survives the challenge from construction unions that sank the governor’s bill in the Legislature.

Wind is perhaps the most promising of the renewable sources, yielding the most energy compared to the energy invested in production. To our south, the Kumeyaay tribe on the Campo reservation is expected to bring an $80 million wind project on line any day now that could power 50,000 homes in San Diego County. Providing such wind power is also one of the power points Sempra Energy, SDG&E’s parent company, is using to sell the public on the new Sunrise Powerlink transmission line it wants to string through the eastern flank of North County.

Trouble on the horizon
But will it be enough? Or are we getting serious about alternative energy sources too late to save us from economic collapse? I don’t know; colleagues who have weathered more energy scares and doomsday scenarios don’t seem half as perturbed.

After the seminar, I briefly returned home to the south shore of Long Island, N.Y. The local utility, Long Island Power Authority, wants to erect 33 windmills between three and six miles offshore Jones Beach. Friends who even now are braving the frigid surf are mobilizing to squash the project, which they believe will ruin the aesthetic value of a still somehow gorgeous coastline. Another wind-power project proposed for Nantucket Sound has met similar opposition —- noted environmentalist Robert F. Kennedy Jr. wrote a scathing op-ed in Friday’s New York Times.

If we are nearing peak oil, and energy prices continue to skyrocket, will this concern for aesthetics seem as quaint as the $3 barrel of oil? The same question holds true on this coast: How long will California’s resistance to offshore oil drilling withstand triple-digit oil prices?

Michael C. Moore, a member of the California Energy Commission during the energy crisis of 2000-2001, recalled at the seminar that the supply-strapped state relied on coal-fired power plants to make up our electricity shortfall. In only three and four hours of operation, those plants exceeded their air quality permits for an entire year, he said.

If another energy crisis comes, will our environmental concerns go up in smoke again?

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